Why 'Keep It' Returns Should Be Illegal

Returns fraud is accelerating, and “keep it” policies are making it worse. Frankly, they should be illegal.

On paper, telling a customer to keep a low-cost item and issuing a refund looks efficient. No shipping. No processing. No restocking. No warehouse touch.

In practice, it's lazy operations dressed up as customer convenience. It creates fraud risk, breaks inventory accuracy, pushes waste onto households, and lets retailers pretend the problem disappeared just because the item never came back. It didn’t disappear. It just became someone else’s problem. And regulators are starting to catch up.

A Fraud Problem Hiding in Plain Sight

Returns are already one of the biggest financial leaks in retail. According to the National Retail Federation, total returns are projected to hit $849.9 billion, with 19.3 percent of online purchases coming back. Of those returns, 9 percent are fraudulent — tens of billions of dollars lost to abuse.

At the same time, consumer behavior is shifting. Nearly half of shoppers say it’s acceptable to bend return policies.

Now layer in “keep it” returns (aka returnless refunds). Once customers realize certain products or price points trigger automatic refunds without requiring a return, behavior changes fast. People test the system. Bad actors scale it. Multiple accounts, repeat claims, no intention of sending anything back.

And most retailers can’t actually measure the damage. If the item never comes back, you don’t know if it was a legitimate customer experience decision or pure fraud. You just know the inventory is gone and the refund was issued. Narvar reports that 75 percent of consumers have received a “keep the item” refund at least once, and 53 percent believe these policies are prone to abuse. That’s not edge-case behavior. That’s a system being openly gamed.

The Logic Made Sense. The Outcome Doesn’t

Retailers didn’t invent “keep it” returns because they were careless. They did it because reverse logistics is expensive.

If a $12 item costs $8 or more to process, inspect and restock, it feels rational to skip the return entirely. That’s why companies like Amazon.com and Walmart normalized the approach.

And initially, it worked — as an exception.

However, exceptions don’t stay small. Narvar data shows that roughly 40 percent-plus of retailers now use “keep it” policies in some capacity. At scale, this stops being a cost optimization tactic and becomes a systemic vulnerability.

You’re Breaking Your Own Data

The quieter issue is just as expensive: bad inventory data. When refunds are issued without physical returns, systems often struggle to represent that outcome accurately. Items get financially written off but not operationally reconciled. That’s how you end up with:

• ghost inventory;
• inaccurate demand forecasting;
• bad replenishment decisions; and
• downstream fulfillment issues.

For operators already managing tight margins and complex supply chains, this is a compounding problem. A bad returns policy doesn’t just cost money. It contaminates your systems.

'Keep It' Doesn’t Reduce Waste. It Outsources It

Environmentally, “keep it” is a convenient illusion. The retailer gets the item off its books. The customer gets stuck with it. Maybe they keep it. Maybe they donate it. But more often than not, it ends up in the trash. So the outcome is:

• no revenue recovery;
• no visibility; and
• increased landfill waste.

For brands with public ESG commitments, that’s a gap between reporting and reality.

Regulation is Moving Fast … and in One Direction

This is where things get more serious. Governments are starting to say what the industry has avoided: if you put a product into the market, you're responsible for what happens to it at the end of its life.

In the EU, the revised Waste Framework Directive now requires Extended Producer Responsibility (EPR) schemes for textiles and footwear. That means producers are financially responsible for the collection, reuse, recycling, and disposal of their products.

Separately, under the Ecodesign for Sustainable Products Regulation (ESPR), the EU has adopted rules that will ban the destruction of unsold apparel, clothing accessories, and footwear for large companies starting July 19, 2026.

The direction is clear: resale, reuse, donation, and recycling are expected, not optional.

In the U.S., California is moving the same way. The Responsible Textile Recovery Act establishes a statewide EPR program that explicitly prioritizes repair, reuse, and recycling, and makes producers responsible for compliance. None of these laws say the exact words “return-less refunds are illegal.” But they don’t have to because the core principle is the same: you cannot push end-of-life responsibility onto the customer and call it solved. “Keep it” policies do exactly that. That’s why they should be illegal, at least in categories where viable recovery pathways exist.

There’s a Better Way

This isn’t about going back to expensive, inefficient reverse logistics. It’s about introducing a third path. Today, most retailers operate between two poor options:

return → warehouse → cost
OR
refund → keep it → loss

There is a better model:

refund → route to productive outcome

This can include donation (with tax recovery), resale channels, localized redistribution, or repair and refurbishment.

Most of the items being written off through “keep it” policies aren’t worthless. They’re just inconvenient to process through traditional systems. And inconvenience isn't the same as end-of-life.

What Operators Should Do Now

• Stop being predictable. Static thresholds will get gamed. Adjust based on customer behavior, category, and risk signals.
• Separate refunds from disposition. A refund decision shouldn't automatically become a disposal decision.
• Fix the data layer. Ensure non-return refunds are clearly tracked so they don’t corrupt inventory systems.
• Build a circular pathway. Returns should be routed into donation, resale or reuse, not defaulted to loss.

The bottom line is “keep it” feels efficient, but it quietly invites fraud, breaks your data, pushes waste downstream, and guarantees loss.

Returns don’t have to be a liability. With the right disposition infrastructure, they become a controlled, measurable asset. And as regulation tightens, retailers won’t just be asked to do better. They’ll be required to.

Disney Petit is a social impact entrepreneur and CEO of LiquiDonate, a software that integrates with any WMS or RMS to match unsellable returns and overstock inventory with nonprofits and schools.